ABSTRACT:Prior
to the 2002-03 academic year, Baylor University’s posted tuition rates were
considerably lower than those of many comparably ranked private
universities.In that year, as part of a
major strategic plan known as “Baylor 2012”, the tuition rate for new students
was increased permanently by more than 30% relative to the 6-7% increases that
occurred regularly before and after that year.This paper analyzes the effects of this tuition increase on net tuition
revenue using a simultaneous equation econometric model of Baylor
finances.The model is used to determine
how Baylor finances would have evolved in the absence of the above-normal
tuition increase.In addition, this
“counterfactual” scenario is compared to what would have happened with the
tuition increase under different assumptions about unfunded scholarships (price
discounts).Net tuition revenue could
have risen as much as 15%, but a significant increase in unfunded scholarships resulted
in a net revenue yield of about 8%.Another
simulation implies that failure to account for the enrollment effect of the
higher tuition could have led to an overprediction of
the increase in net tuition revenue by more than 100%.